Twitter's $-potential pondered

2009-07-09 20:14

Sun Valley - It turns out the media elite aren't so different from a lot of less affluent people: They think Twitter is a great communications tool, but can't figure out how the online messaging service is going to make money.

The recurring doubts about Twitter's moneymaking potential cropped up again Wednesday as an exclusive media summit hosted by investment banker Allen & Co got under way at the posh Sun Valley resort.

One of the first sessions focused on how to capitalise on digital media. Twitter quickly became a focal point of the discussion because it has emerged as one of the internet's fastest growing services this year.

But Twitter hasn't attempted to profit from its popularity yet, leaving everyone guessing about how the 3-year-old start-up intends to pay its bills after it exhausts its $55m venture capital.

Twitter will face major challenges

The participants on the panel moderated by media writer Ken Auletta of The New Yorker magazine predicted Twitter Inc will face major challenges when the San Francisco-based company finally tries to generate revenue. Reporters were barred from the session - like all other meetings at the media summit - but Auletta confirmed the tenor of the Twitter talk afterward.

Two of the panel participants, veteran media executive Barry Diller and cable television magnate John Malone, reiterated their skepticism about Twitter's money making potential in separate interviews.

"I think it's a great service. I just don't think it's a natural advertising medium," said Diller, who is currently chief executive of online conglomerate InterActiveCorp.

Malone, chair of Liberty Media Corp, also believes Twitter will be hard-pressed to sell advertising on its messaging service without alienating users. Twitter's best bet, Malone said, probably is to simply get people so addicted to the service that they might eventually pay fees.

YouTube still isn't making money

It's an idea that YouTube, the internet's leading video service, might want to try. Malone said billionaire investor Warren Buffett confided that he enjoys watching YouTube so much that he would be willing to pay a $5 monthly subscription for access. Although YouTube is more popular than ever, it still isn't making money nearly three years after Google Inc bought it for $1.76bn.

Buffett declined an interview request on Wednesday.

Twitter Inc's co-founders, Evan Williams and Biz Stone, still haven't revealed their business model, but have indicated that advertising is low on their priority list. They have suggested they might impose fees on companies interested in mining the data about consumer preferences and peeves that pour into Twitter.

Williams attended Wednesday's sessions, but didn't speak up when other executives expressed doubts about Twitter's revenue prospects. He declined to be interviewed as he left the morning discussion.

Many media executives running long-established companies are wrestling with their own daunting problems as the internet lures consumers and advertisers away from them. Few of the executives attending the media summit wanted to talk about that trouble on Wednesday.

Some of the most best-known people on the summit's guest list still hadn't arrived on Wednesday as many of the folks on hand embarked on a whitewater rafting adventure.

The prominent absentees included Google CEO Eric Schmidt, professional basketball star LeBron James and Facebook Inc CEO Mark Zuckerberg - another internet whiz still trying to prove that his service for online banter will mature into a profitable business.

- AP